Higher inflation and fear of recession impact energy complex

Since ICR’s most recent energy report, the energy complex is trending lower due to higher inflation and the fear of recession. Higher interest rates are fuelling demand destruction. Russia is offering discounts to non-sanction countries, affecting the price of oil and coal. The price of oil was down sharply following the IEA report on falling demand, combined with the OPEC+ plan to increase production in August. Increased demand for coal in the EU is supporting the price of coal with higher quality coal particularly in demand.

Steam coal and petcoke FOB prices - historical view 2007-22

Petcoke prices are falling despite high discounts on current levels with increased supply leading to a buyers’ market. The high-sulphur (6.5 per cent S) petcoke FOB contract is currently at US$155, with an expected trading range of US$145-180. Resistance is to be found at US$170, 200, 215, 235 and 250, while support is around US$155, 125 and 115. Multiyear support is found at US$36.

High-sulphur petcoke (6.5%) 40HGI FOB USGC - historical view 2007-22

Discounts for high-sulphur petcoke when compared with API4 coal have increased when compared with previous energy report. The discount for 6.5 per cent S petcoke FOB sold at US$155 is at 62 per cent when compared with 3Q22 API4 coal sold at US$325. The CIF ARA 6.5 per cent S petcoke contract sold at US$184.50 is at a discount of 58 per cent, when compared with 3Q22 API2 coal sold at US$350.

Freight rates rose slightly with the USGC-ARA contract at US$29.50.